Tagged Questions

[Think of it as insurance. When people decide to hedge, they are insuring themselves against a negative event. This doesn't prevent a negative event from happening, but if it does happen and you're properly hedged, the impact of the event is reduced. So, hedging occurs almost everywhere, and we see ...

Suppose that you were importing small electric transformers, that delivery from all suppliers would take approximately 6 months, and that you faced the situation shown in the table below:
The Table
...

An airline expects to purchase 2 million gallons of jet fuel in 1 month and decides
to use heating oil futures for hedging.
The variance of the heating oil futures price is 1,5 times bigger then the ...

I'm attempting to use PCA to hedge a small fixed income portfolio. I start with one particular bond and chose the nearest other bond to hedge the 1st principle component. This decreases the portfolio ...

Say I buy a 10-year bond with a notional of 100k. To hedge my credit risk entirely I could buy a 10-year CDS, also on a notional of 100k.
Now, if there are only 5-year CDS trading and no 10-year CDS, ...

I'm a finance professor and I am looking for someone with actual trading and risk management knowledge within the energy sector who can tell me about pricing and hedging energy (especially electricity ...

Consider I have two stocks $A$ and $B$, $A$ is trading at $\$40$ and $B$ at $\$30$. The standard deviation of its returns are $\sigma_A=25\%$ and $\sigma_B = 30\%$. Correlation between the returns is ...

I'm working on a client memo explaining several approaches to equity hedging, and I'm looking for a not-too-technical term for a hedging strategy where I try to keep options near the money, as to have ...

I used the daily returns of SPX Index, SPY US Equity, and SPA Index. I then calculate their standard deviation as hedging instruments with respect to SPX Index, i.e., (spx_ret - spy_ret) or (spx_ret - ...

Suppose that I enter an Equity Swap, such that I pay a floating rate and I receive the equity return. The payment is every one year for both the rate and the return, and the swap expires in one year. ...

I am working on hedging agency MBSs using treasury bonds. So my question raise as which treasury bond should more likely be a hedging underlying of a MBS. What is the matching criteria usually for MBS ...

Suppose we have an index whose value is calculated by a weighted geometric mean. Now we want to recreate the index using its underlying components. How would we go about calculating the hedge ratios ...

Suppose we have a stock $X$ at which trades at 100 dollars. We suppose the stock follows a geometric brownian motion. We know that the interest rate is zero and annual volatility is 10 percent. How ...

Traders hedge to reduce their risk. However, wouldn't reducing the position achieve the same results while keeping the risk management process simpler? At least, one need not worry about making the ...

I am faced with the following problem. Let the standard Brownian motion $W_t$ be the price process of a traded asset in an economy with zero interest rate. Define $$A_T=\frac{1}{T}\int_0^T W_t^2 dt$$
...

I am looking for some paper or similar which deal with this topic: hedging bankruptcy on firm's debt using Put options written on that firm's equity price.
This should be based on the assumption that ...

I am referring to an electricity production company. Company is located in AsiaPac. The power is generated using Natural Gas fired combined-cycle power plants. Then this electricity is distributed to ...

I am currently trying to understand the in's and out's of options and more specifically hedging. I came across a document that was talking about Delta Hedging which is just making sure the delta of ...